Donald Trump, known for his knack for managing debt in real estate, faces a far more daunting task as he assumes office as the 47th president. The national debt, set to exceed $36 trillion by January 20, has nearly doubled since his first term in 2017, when it stood at $20 trillion. Public debt as a percentage of GDP has also soared from 75% to 96%.
Unlike business debt, refinancing is not an option, and a federal government bankruptcy is inconceivable. Long-term interest rates have risen despite the Federal Reserve cutting short-term rates, signaling market unease with the Treasury Department’s relentless borrowing. Rising rates will mean higher costs for consumers, businesses, and the government itself.
Trump’s agenda faces three major challenges. First, Congress must raise the debt ceiling by mid-2025, risking a contentious political battle. Second, further standoffs could trigger additional credit downgrades, further eroding confidence. Finally, extending Trump-era tax cuts could add $5 trillion to the debt, leaving few options to curb spending without angering key stakeholders.
While this monumental debt challenge will test Trump’s presidency, it may ultimately fall to his successors to find long-term solutions.